Retailers shift their ad spending from TV, radio and print ads to digital ads.
Office Depot Inc. is on track to do $3 billion this year in worldwide online sales, up 20% from last year’s $2.6 billion, executive vice president Monica Luechtefeld told the Shop.org Summit meeting in Anaheim, CA, in her keynote address today.
Office Depot Inc. is on track to do $3 billion this year in worldwide online sales, up 20% from last year’s $2.6 billion, executive vice president Monica Luechtefeld told the Shop.org Summit meeting in Anaheim, CA, in her keynote address today. While Office Depot continues to expand in other channels-it operates 901 stores in North America and creates 1,100 unique catalogs every year and mails 350 million copies of them-it is moving significant percentages of customers to the web. 55% of small business customers do business online with Office Depot online and the company expects that to grow to 60-65% this year. 65% of large companies do business online and Office Depot expects that to grow to 70-75% this year.
The stellar growth of online sales is one prong of Office Depot’s multi-channel strategy, Luechtefeld reported. "Multi-channel has moved from a strategic differentiator to a strategic necessity," she said. "The challenge will be to manage your customers across channels rather than in one channel."
She reported that from the start of its online operation, Office Depot decided that it would operate all channels as an integrated whole. "We decided not to set up the Internet as a single silo that competed for customers," she said. "We tracked sales to the web but allowed sales reps to get credit for the sale that applied to their salary and bonus."
The decision changed the culture within Office Depot, she said. "It was an indication that not only was the Internet strategic, it was required," she said. In fact, the company decided that the Internet was so important that it changed sales rep’s compensation so that they reached their bonus levels only when their customers hit certain levels of orders on the Internet.
The decision to treat the Internet as another channel and not as a separate operation meshes with customers’ views of the companies, she said. Noting that she reviews weekly reports from BizRate.com, which surveys customers as they leave OfficeDepot.com, Luechtefeld said, "They’ve just been surveyed about their online experience but 50% of the time they will include comments about their store experience."
The effect of cross-channel shopping is profound, she said. Of customers who perform most of their transactions in stores, nearly 5% still conduct sales over the phone and 14% online. Of customers who primarily are online, 27.7% use the phone and 83.7% visit retail stores. Of primarily phone customers, 80.2% shop online and 45.3% visit stores.
Among the challenges in creating a multi-channel strategy, she said, is maintaining consistency across channels. She noted that Office Depot runs special prices on printer/copier paper, for instance, that varies by region and store. Making sure that the right price shows up on the web site is challenge. That challenge is magnified by the speed with which information moves across the Internet. When a retailer puts a deal online, it better make sure that it’s a deal that it wants all its customers to know about, she said. "It’s likely to come back to you through chat rooms and deal sites," she said.